business fail

Business Forensics: A Short Look Into Why Hummer Failed

Hummer used to be one of the biggest car brands in the early 2000s. It was everything Americans wanted in a vehicle back then. It looked robust, runs great off-road, and shows American patriotism better than any car on the market. Also, it was marketed as Arnold Schwarzenegger’s vehicle of choice. The brand sold more than 7 ,000 vehicles at its peak. Each of these vehicles costs between $50,000 to $100,000. That’s an average of $3.5 billion in revenue.

At the time, it seems that Hummer was a brand tailored for success. But it eventually failed in 2010. Where did Hummer go wrong when it was projected to earn billions more in the next few years? The answer to that is a mix of economics and bad luck. Here is a look into why a successful brand like Hummer failed when it was at the top of the corporate world.

The Price

If a car salesperson approaches your right now and tells you that you can buy a luxury vehicle for $100,000 right now, you’d probably laugh in front of his face because you know you can buy two luxury cars for the same price. That’s what everyone thought of when Hummer rolled out its first few vehicles in the market. The only people who bought them were celebrities and billionaires, and no one in between. This is why General Motors eventually lowered the price to $50,000 somewhere in 2005, which eventually led to its peak sales in 2006.

However, it was nowhere near enough to the expenses the company incurred in producing these vehicles. That’s right, about $3.5 billion in revenue wasn’t enough to pay for the manufacturing cost of Hummer vehicles. General Motors reduced the price to half to attract the average American consumer to buy the vehicle. But no one in their right mind would buy a $50,000 Hummer because it’s not cost-efficient when compared to entry-level luxury cars out there. And you’d probably pay more money by simply using it on the road.

Luxury Parts, For a Luxury Vehicle

car manufacturer

Hummer had another problem aside from its price, and that is, you can’t find parts for it no matter how hard you try. Do you know that you have a better chance of buying the perfect car tyres for your Hummer vehicle today compared to the years it was famous? This is because tire manufacturers can create custom-made tires for you today. Back then, you’ll have to buy the tire from General Motors yourself, at a hefty price.

One of the main problems of Hummer was that its parts, especially its tires, were near impossible to find in the market. No mechanic in the right mind would fix it up for you either, since its parts aren’t circulated in the market. The best thing you can do is bring your vehicle back to the manufacturer (General Motors), and they do the necessary repair for you. That is only if you pay them a hefty amount of cash.  This is one of the main reasons people barely bought a Hummer because these vehicles are so expensive. It’s also expensive to maintain them.

Reducing the price cost of a luxury vehicle to fit the average American’s salary better doesn’t mean that they are likely to buy it if they know that they’ll have to spend thousands on maintaining it. It’s not a smart investment decision, and even the wealthiest avoided buying it. But the price and the rarity of its parts aren’t the only things that brought Hummer down. It was also its timing in the market.

The 2008 Recession

Luxury vehicles become one of the very first things people sell during a recession. This because no one can afford to use it when gas prices are so high. This is one of the main reasons why Hummer looked even less attractive to consumers.

During the 2008 recession, gas prices went up by a ridiculous amount. It was one of the few times that the average gas price reached four dollars a gallon. For those who need high-quality gas for their luxury cars to run, they’d be spending about six dollars a gallon. At the time, the average Hummer owner was already spending

Share on facebook
Share on twitter
Share on linkedin

Categories

Most Popular

Recent Posts

Newsletter

Scroll to Top